A Powerful New Weapon Against Patent Trolls

This article is by Cheryl Milone, the founder and chief executive of Article One Partners, a venture-funded patent prior art research community.

The America Invents Act patent reform law, which passed last year, contains a little-known feature that will soon give companies a lot more ammunition for shooting down patent troll lawsuits.

As anyone who reads the news knows, patent wars have become a serious problem in business. Technology companies are spending billions of dollars to beef up their patent arsenals and litigate them. And in the surging smartphone market, the major players have unleashed a circular firing squad of patent suits against one another. It’s gotten so bad, in fact, that according to The New York Times,Apple and Google, the world’s two top innovators, now spend more on patents and patent litigation than on research and development.

But it’s not just the large technology and smartphone companies that are at risk. Midsize and smaller companies in a host of industries are being targeted by a species of litigant known as patent trolls, who are to patent law what ambulance chasers are to personal injury law. New research by Colleen Chien at the University of Santa Clara School of Law finds that small and midsize companies with less than $1 billion in revenues now constitute 90% of the unique defendants in patent troll suits. Firms with less than $100 million in revenue represent 66% of the defendants.

What many companies don’t realize, though, is that half the time a patent gun is leveled at them, it’s loaded with blanks, not real bullets. That’s right: About half of the patents asserted against companies end up invalidated when litigated in court or re-examined by the U.S. Patent and Trademark Office during what’s known as an inter partes review. If you include patents whose claims are narrowed as well as those cancelled entirely—and it’s the claims that define the limits of a patent’s value and an infringer’s liability—then a staggering 89% of all patents reviewed by the USPTO are judged either partly or wholly invalid.

The Achilles heel of any patent is what is known as prior art. Prior art means any previous patent, technical paper, or public knowledge or use of an invention that makes it ineligible for a patent. Under the law, a patent may be issued only if an invention is useful, novel (i.e., not previously known or described), and nonobvious—meaning, not an obvious outgrowth of an existing technology. An examination of prior art determines whether an invention is novel and nonobvious.

Thanks to the America Invents Act, after March 16, 2013, a whole new treasure trove of prior art will be able to turn a patent from a legal weapon into literally a worthless piece of paper:

Unpublished patent applications:For the first time, unpublished patent applications, i.e., applications pending in the USPTO system for less than 18 months, can invalidate a later patent if these contain prior art that anticipates the invention.

Foreign patents and applications: For the first time, foreign applications and patents can also invalidate a later U.S. patent, if they contain prior art that anticipates the invention. According to Gene Quinn, of the influential IP Watchdog blog, “Foreign patents and applications will now make it much easier to challenge issued U.S patents.”

Public use anywhere in the world: The biggest new source of invalidating prior art involves “on sale” or “public use”—i.e., has an invention been previously used, offered for sale, or publicly disclosed?—which is being expanded from the U.S. to cover the entire globe. This means that even a seminar discussion about some interesting new technology at an engineering conference in Korea or China, presented in the Korean or Mandarin language, will be able to kill a U.S. patent on that technology acquired later.

Though few realize it, foreign prior art has often invalidated U.S. patents. Take the case of BlackBerry device maker Research in Motion, which agreed to pay $612 million to patent holder NTP in 2006 to settle an infringement case. Would RIM have paid up had it known that the USPTO would later invalidate the majority of NTP's patent claims after discovering a university research paper predating the NTP patents in a library in Norway?

Besides creating new kinds of prior art, the AIA also creates new ways for companies to use it to invalidate a patent, both before and after it is issued, and without the presumption of validity of a federal court proceeding.

Pre-issuance submission of prior art: Any interested third party can now submit prior art that patent examiners can use to deny a patent for a pending application.

Inter partes review: An Inter partes review may also be initiated after a patent is granted or after a post-grant review proceeding is completed. In these hearings, only prior art based on previous patents or printed publications may be used to invalidate a patent.

Covered business method patents: A major plus for business and financial professionals is a new Transitional Program for Covered Business Method Patents, which allows a company sued for infringing a financial business method patent to use a post-grant-review-like procedure to challenge its validity. A covered business method petitioner may only challenge the validity of a patent’s claims pertaining to the practice, administration, or management of a financial product or service, not the patent’s technological claims.

Put it all together — more prior art and more ways to use it — and what have you got? Prior art has now become the killer app of the patent wars.

But you have to be able to find it, and therein lies the challenge. As the large number of invalid patents shows, the USPTO’s system for finding prior art to determine whether an invention merits a patent is less than perfect. Patent examiners—who have endured a fourfold increase in patent applications over the last 20 years with no commensurate increase in USPTO funding or staffing—have only a few hours at most to research all the prior art for an application. It’s no surprise that a lot of prior art goes undetected.

A traditional prior art search firm can certainly help, but even they will miss some prior art in other languages. To address this problem, Article One Partners has mobilized a crowdsourced global community of 25,000 researchers, most of them highly-skilled technical, scientific or patent professionals, in 160 countries to uncover the prior art that others miss.

But whatever method your company employs to find it, prior art now puts the initiative in the patent wars back in your hands.